By BILL VIRGIN, P-I COLUMNIST

Published 10:00 pm, Wednesday, April 9, 2008

A FAITHFUL READER of and frequent correspondent to this column writes about news of yet another delay in the 787's delivery schedule:

"Institutional memory is a fragile thing. Did the guy who knows how to make airplanes move to Chicago or D.C.? Or did Boeing forget how to make airplanes, sort of like how Starbucks seemingly forgot how to make coffee?

"Maybe Boeing can take a clue from Starbucks and ask its customers to send them suggestions over the Internet for ways to get the Dreamliner airborne. Or perhaps someone will put up a clever highway billboard alongside I-5: 'Will the last Boeing executive who knows how to roll out a new plane please return to Seattle?' "

Dagnabbit, leave the smart-aleck lines to us professionals.

But such are the comments a company invites when it puts its credibility in jeopardy.

What we have here is, to use a hackneyed phrase, a "teaching moment," an opportunity to discuss a few themes from columns last year (we don't call it recycling here, we prefer to think of it as "repurposing" material, or perhaps coming up with a derivative model).

In September, for example, we discussed the issue of credibility, in the form of companies and delivery schedules for their products:

"How much a slipped delivery deadline undermines credibility also depends on how long the delay actually is, the reasons behind it, how desperate the customer is for the product and how well-managed expectations are that the delivery promise will be met."

To illustrate: People didn't much care that Microsoft was late on delivering its Windows Vista operating system, in part because few people were clamoring for a new operating system (turns out, they still aren't).

Airlines were clamoring for a new plane, particularly one that might deliver what Boeing promised. But they and investors were willing to cut Boeing some slack on when they actually got the plane, given that introducing a new plane and a new production scheme simultaneously was a virtual guarantee of a delay.

Provided, of course, that you eventually make good on your revised promises. In Boeing's case, though, that was several revisions ago, and even after the latest "this time we mean it" schedule, there's considerable skepticism that Boeing will make the new deadline.

Although investors seemed relieved by the announcement, to judge by where the stock price went, there were also indications that patience is much thinner than in September. Launch customer ANA, in a statement, said it was "extremely disappointed" and expressed frustration that it still doesn't have what it considers a definitive schedule for when it will get its planes. In the corporate world, that sort of language passes for positively testy.

So Boeing is in trouble on the length-of-delay and expectation-management counts. Its one advantage is that customers don't have many options for new planes. Airbus, you might have heard, has a bit of a delivery-delay issue of its own. Investors, on the other hand, do have other options, and more costly delays will not enhance whatever credibility Boeing has left with them.

While we are on the subject of past column topics, it's also worth revisiting, for a moment, the concept of do-it-yourself as it applies to the tasks a company chooses to keep in-house and those it farms out (or outsources) to others.

This column has on multiple occasions questioned the long-term wisdom of companies, and countries, outsourcing to the extent that doing so drains capabilities for technological innovation and production quality.

Now Boeing is enduring some short-term pain from its attempt to shift from airplane manufacturer to a company that emphasizes design, subcontracting, assembly and systems integration. The opportunity to point out the shortfall was not lost on SPEEA, the engineering and technical employees union, which issued another call for Boeing "to correct its flawed reliance on global partners and bring the work back while the company still has the in-house experience to do it right."

SPEEA has its own self-interest in making that call, but the point is still valid. Boeing itself would seem to agree with the notion that direct control has some merit, having recently bought a stake in a company that is producing fuselage parts for the 787. That's a tacit admission that the globalsupply-chain model is not quite ready to move from theory to real-world application.

Investors and customers aren't terribly particular about which model Boeing uses to produce planes. What they do care about, and what Boeing's credibility rests on, is whether the company can successfully harness production skills -- its own or someone else's -- to transform the world's largest lawn ornament into something that can actually clear its own shadow.